Exam 46: Securities Regulation

Mark Hubbard has been very successful in the cattle business over a number of years.Hubbard has decided to establish a cattle program as an investment tool.He will purchase cattle with investors' money and then provide medical care,feed,and transportation on a service contract basis.The profits then will be divided proportionately among the investors.An investment company,Money Ventures,Inc. ,is interested in the entire offering of Hubbard's cattle program.Hubbard is unsure as to whether the securities acts apply to him.In addition,he wonders whether his venture,as structured,is exempt if the activity is within the securities acts.Should Hubbard be concerned?

The Litigation Reform Act of 1995 provides for joint and several liability for defendants who are found not to have knowingly committed a violation of the security laws.

An unlawful sale under the Insider Trading Sanctions Act of 1984 can result in a civil penalty of up to how many times the profit gained or loss avoided?

Which of the following acts was passed to ensure that public shareholders faced with a cash tender offer would not be required to respond without sufficient information?

Investors who lack inside information and have sold their stock during the relevant time period may recover damages from insiders who have made use of the undisclosed information.

The Securities Act of 1933 requires a seller to provide a prospectus to each potential purchaser of an original issue of securities.

The Market Reform Act of 1990 empowers the SEC to suspend all trading when markets are excessively volatile.

Companies whose securities are listed on a national securities exchange and unlisted companies with assets in excess of $10 million and 500 or more shareholders are exempt from the reporting requirements of the Securities Exchange Act of 1934.

Under Regulation D,Rule 506,sales may be made to:

The Insider Trading and Securities Fraud Enforcement Act of 1988 gave the SEC authority to bring an action against an individual purchasing or selling a security while in possession of material,inside information.

A corporation may sue a director owning more than ten (10)percent of any class of corporate stock who makes a profit by selling any such stock:

Under SEC Rule 504 of Regulation D,an issuer can offer and sell up to $2 million in securities within a 12 month period without registration and without most of the restrictions contained in Rules 505 and 506.

The registration process under Section 5 of the 1933 act is divided into three time periods.In order,they are:

Individuals who steal valuable nonpublic information in breach of a fiduciary duty to their employers and trade in securities on that information are guilty of insider trading as "misappropriators."

Federal regulation of the sale of securities is based on the:

A prospectus sets forth the key information contained in the registration statement.

A "short-swing" profit is realized by a corporate insider from selling corporate securities less than one (1)year after purchase.

Securities covered by the securities acts includes only investment instruments such as stocks and bonds not "investment contracts."

An investment contract exists if which of the following elements are present?

In every 10b-5 situation,the plaintiff must show "reliance" on the misrepresentation and a resulting injury.